For a fairer marijuana industry, the state should fund loans
It took almost three years for Western Front, Chelsea’s premier recreational marijuana retail store, to open since the company was formed in early 2018. During that time and before it could sell just one edible product, its founders and investors – the majority of whom are Black and Latinx – spent around $ 3.5 million.
High upfront costs, such as renting a storefront and hiring lawyers to navigate local licensing and zoning laws – are the norm in the tightly regulated cannabis economy. These costs are one of the main reasons why it has been so difficult for entrepreneurs of color to break into the industry, which was supposed to create economic empowerment opportunities for them in particular. Fewer than a handful of marijuana retail stores certified under the state’s economic empowerment program, established as a means of uplifting communities of color in the industry, have successfully opened. The Western Front is one of them.
Almost five years after voters legalized recreational marijuana with the central tenet of inclusion, it perhaps shouldn’t surprise anyone why fairness remains elusive: People of color simply face too much obstacles to raising the huge capital needed to enter the cannabis space. A simple way to reduce some of these barriers to access is to establish a state fund that would issue public loans to qualifying marijuana startups owned by people of color. It’s a long overdue measure that lawmakers in Beacon Hill should pass quickly.
American poet Ralph Waldo Emerson once said that “money is often too expensive”, and the phrase rings especially true for aspiring black and Latino entrepreneurs trying to enter the cannabis industry. “You have to make sure that you are going to be able to afford the shipping costs for a long time,” said Dennis Benzan, CEO and one of the founders of Western Front, in an interview. The process of obtaining municipal permits can take months. As a general rule, before applying for local permits, a location must be rented. That means paying months and months of rent, said Benzan, who is Afro-Latino of Dominican and Puerto Rican descent. It’s basically wasted money.
“When local communities became gatekeepers, it added a lot to the process,” Jim Smith, a local cannabis lawyer, told me in an interview. “I won’t take a client until they have a location and it’s very difficult to find. Once they find it, owners usually add the marijuana bounty as well. . . inevitably increase the rent. Lawyers like Smith are also included in these overheads.
What makes these challenges worse for people of color seems obvious. There are no business loans available from banks as marijuana remains an illegal substance under federal law. “The people who will lend you money [charge] huge interest rates, ”Smith said. Attracting investors is a possibility, of course, but minority investors or companies “have the burden of continuing to establish that they are under minority-majority control,” Benzan said. “If I want to sell my stake, I have to find another minority investor, and there isn’t much with that kind of wealth to start with.” This is another irony of the conundrum of fairness in the cannabis space. “It was supposed to be like this [people of color] create wealth, ”Benzan told me. “But a lot of minority businesses, as they crawl to open up, go into debt daily.”
Two years ago, State Senator Sonia Chang-Díaz tabled a budget amendment that would have created a government-run trust fund to provide interest-free loans to candidates for economic empowerment (like the Western Front of Benzan) and participants in the Cannabis Control Commission social equity program. , which provides technical assistance to eligible business owners from communities of color. The amendment was not adopted. But there are currently four bills that would establish some form of public social equity fund.
The Legislature’s Joint Committee on Cannabis Policy held a hearing last week on such bills. Nurys Camargo, a CCC member, testified in favor of the creation of a state fund “that can provide capital to start businesses,” she said in remarks reported by the State House News Service. “Only 10 share program participation licenses opened,” Camargo said at the hearing.
It’s obvious. “If we’re going to have a social equity program, we need capital,” Smith told me. “And there is money at the state level. . . the state is taking too big a share, ”he said. “Set aside one of those tax percentage points to fund the equity loan program. Do the math: Gross sales of recreational cannabis recently exceeded $ 1.5 billion in gross sales since retailers opened in November 2018.
Indeed, the legislature should make this session a priority for the establishment and operation of a loan fund managed by the State. Otherwise, the promises of fairness, restorative justice and economic empowerment inherent in Massachusetts’ cannabis law will never come true.